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New Bijli Foundry Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference Nos. 22 and 23 of 1976
Judge
Reported in(1981)23CTR(P& H)10; [1982]135ITR593(P& H)
ActsIncome Tax Act, 1961 - Sections 271(1)
AppellantNew Bijli Foundry
RespondentCommissioner of Income-tax
Appellant Advocate H.L. Sibal and; S.C. Sibal, Advs.
Respondent Advocate D.N. Awasthy and; B.K. Jhingan, Advs.
Excerpt:
.....proceedings for determining or computing the tax is not conclusive but it was further held that it was good evidence in the penalty proceedings. the sole ground given for recording this finding was that the explanation furnished by the assessee had been found to be unreliable......was conducted by the sales tax authorities on the premises of the assessee and during the search uchanti bahi containing record of the transactions of purchase and sale, which were not shown in its account books, was also seized. when called upon to produce this uchanti bahi, the assessee showed its inability to do so and alleged that the same was lost while returning from the office of the assistant commissioner of sales tax, jullundur, on april 8, 1963. he, however, produced certified copies of the extracts made from that bahi by the sales tax authorities which showed sales and purchases to the tune of rs. 1,58,919 and rs. 1,54,000, respectively, outside the regular account books. the ito rejected the purchase entries and added the whole of the amount of rs. 1,58,919 to the income of.....
Judgment:

S.P. Goyal, J.

1. The assessee, a registered firm, is engaged in the manufacture and sale of sewing unchines, lathes, milling machines, drills, chaff cutting machines, machinery casting and assembling of radios. In the revised return filed for the assessment year 1961-62, it declared its income at Rs. 68,331. During the assessment proceedings the ITO discovered that a surprise raid was conducted by the sales tax authorities on the premises of the assessee and during the search Uchanti Bahi containing record of the transactions of purchase and sale, which were not shown in its account books, was also seized. When called upon to produce this Uchanti Bahi, the assessee showed its inability to do so and alleged that the same was lost while returning from the office of the Assistant Commissioner of Sales Tax, Jullundur, on April 8, 1963. He, however, produced certified copies of the extracts made from that Bahi by the sales tax authorities which showed sales and purchases to the tune of Rs. 1,58,919 and Rs. 1,54,000, respectively, outside the regular account books. The ITO rejected the purchase entries and added the whole of the amount of Rs. 1,58,919 to the income of the assessee. On appeal, the AAC agreed with the other findings of the assessing authority but reduced the addition to 20 per cent. of the sales which according to him was the normal rate of profit. On second appeal, the Tribunal upheld the principles followed by the appellate authority in determining the income from the Uchanti transactions and allowed reduction of 2 per cent. in the gross profit.

2. For the suppression of its income, the IAC, vide his order dated March, 16, 1968, levied a penalty of Rs. 72,812 on the assessee. On appeal, the Tribunal held that since Uchanti Bahi contained secret transactions which were not incorporated in the regular account books, the assessee had concealed its income and so the penalty was rightly levied under Section 271(1)(c) of the I.T. Act. It, however, reduced the amount of penalty to 40 per cent. of the tax sought to be evaded instead of 50 per cent. on the basis of income as finally determined in the quantum appeal.

3. Dissatisfied with the above orders. the assessee moved two applications for referring six questions as mentioned in the statement of the case to this court under Section 256(1) of the I.T. Act which were declined by the Tribunal. However, on a move by the assessee under Section 256(2) of the Act,the following questions have been referred by the Tribunal on the directions of this court:

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not admitting the ground of appeal to the effect that Uchanti Bahi business was an independent one

2. Whether, on the facts and in the circumstances of the ease, the Tribunal did not give proper weight to the Uchanti Bahi statement procured from the Excise and Taxation Department

3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in levying penalty under Section 271(1)(c) ?'

4. So far as the first question is concerned, the learned counsel for the assessee has fairly conceded that, in the absence of a plea that the business transactions contained in the Uchanti Bahi belong to a distinct and separate partnership concern, the question referred is of no consequence and need not be answered, It was also not refuted that the second question, as framed, would not be a question of law strictly speaking. However, the contention raised was that the Tribunal, in the facts and circumstances of the case, had no justification to reject the purchase entries contained in the Uchanti Bahi when the entries relating to the sales therein were accepted and used against the assessee. Even this contention of the learned counsel does not constitute a question of law but even if it may be so it has to be answered against the assessee.

5. The Tribunal gave three reasons for rejecting the purchase entries, namely, that the original Uchanti Bahi had been mala fide suppressed ; that no purchase vouchers in support of the entries were forthcoming and that the profits shown were extremely inadequate. All this were quite relevant and valid reasons for rejecting the purchase entries and the view of the ITO was approved and affirmed by the Tribunal on second appeal. As a matter of fact, no serious attempt was made to urge before the Tribunal that the rejection of purchase entries in the Uchanti Bahi was not justified. But even otherwise also it is not open to us to go into the sufficiency of the reasons and substitute our own opinion. Consequently, the second question is also answered against the assessee and in favour of the revenue.

6. On the third question, the finding of the Tribunal that there has been concealment and furnishing of inaccurate particulars regarding its income by the assessee has not been challenged. The question, as framed, therefore, can hardly arise because the moment the above finding is accepted, the provisions of Section 271(1)(c) would be attracted and the penalty exigible. According to the learned counsel for the assessee, the quantum of the concealed income and of the penalty imposed would also be covered by thequestion framed and he has sought to assail the order of the Tribunal regarding the same. The argument raised in this respect was two-fold, viz., that the authorities were not justified in rejecting the purchase emries in the Uchanti Bahi and that the finding in the assessment order was not conclusive. Reliance for the second argument was placed on a Supreme Court decision in CIT v. Anwar Ali : [1970]76ITR696(SC) . The first argument has to be rejected for the reasons already recorded above while discussing question No. 2. As regards the second argument it was held in Anwar Ali's case : [1970]76ITR696(SC) that the finding given in the assessment proceedings for determining or computing the tax is not conclusive but it was further held that it was good evidence in the penalty proceedings. In that case certain undisclosed amount was detected in the bank account of the assessee. His explanation regarding this amount having been rejected, the I.T. authorities took it as the income of the assessee from undisclosed sources. The sole ground given for recording this finding was that the explanation furnished by the assessee had been found to be unreliable. On a reference, the High Court reversed that finding and held that the I.T. authorities were not justified in imposing the penalty. The decision of the High Court was confirmed by the Supreme Court and in was ruled that in the absence of cogent material evidence, apart from the falsity of the respondent's explanation, from which it could be inferred that the respondent had concealed the particulars of his income or had deliberately furnished inaccurate particulars is respect of the source and that the disputed amount was a revenue receipt, the penalty could not be imposed. Obviously, the rule laid down or the ratio in the said case has no bearing on the present case. Here, the finding regarding concealment of income and furnishing of inaccurate return has not been disputed nor the figures of the sale amount. The assessment of the profits at the rate of 18 per cent. to derermine the question of the concealed income was also not assailed. What was urged was that there being no definite evidence regarding the concealed income and the same having been arrived at by the process of assessment of profits at a particular rate, the finding recorded during the assessment proceedings in this respect would not furnish adequate ground for imposing penalty on its basis. We do not find any merit in this contention. The finding recorded in the assessment proceedings as held in Anwar Ali's case : [1970]76ITR696(SC) is certainly relevant in the assessment proceedings. Moreover, the finding recorded in the present case cannot be said to be without any basis because the amount of the sale proceeds is not in dispute and, in the absence of the trading account, the authorities were fully justified in estimating the profits on a percentage basis. Consequently, the third question is also answered in the affirmative, against the assessee and in favour of the revenue. No costs.


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